BM’s U-turn on BTL Mortgages for Landlords with Tenants on Benefits

Posted on March 13, 2013.

Shortly after announcing that many of it’s BTL mortgage products would not allow housing benefit tenants, BM Solutions has now removed these restrictions.

The company made the move after The Mortgage Works, Nationwide’s buy-to-let arm, made a u-turn on a similar decision last week. The Mortgage Works said it had decided to exclude buy-to-let tenants in a move that brought it into line with several other buy to let lenders. However, it changed its mind following comments from lenders.

BM, which is a part of Lloyds Bank, has also removed its restriction on these tenants.

The bank is state-owned, raising questions about the restriction, which could create problems with housing availability for those on low incomes.

A spokes person for BM said: “Recognising the increasingly important role Buy to Let has in meeting housing demand, we have reviewed our current policy relating to tenants receiving housing benefits and its impact on our lending decision. We can confirm that we are updating our policy. This condition will not be enforced on new or existing mortgages.”

David Cox, of the National Landlords Association (NLA) said that many lenders had a ban on landlords renting to tenants receiving housing benefit. However, he said that it was not very strictly enforced.

Experts have been worried that the Government’s changes to the benefit system will lead to more lenders pulling out of lending on houses that are rented to these tenants.

The Government’s changes to the welfare system begin with a cap on benefits of £500 a week for families and £350 a week for a single person. This will be followed by one “universal credit” payout for everything, rather than several different benefit streams.

Experts have raised concerns that bringing all benefits together in one payment will prevent housing benefit being paid directly to landlords. This could ring alarm bells with mortgage companies, meaning that they will be tougher on landlords who rent to claimants.

Mr Cox warned that buy-to-let landlords could also have other issues to face with funding, particularly with the new European mortgage directive. If the buy-to-let sector is included in the proposals, new landlords will be unable to get mortgages because they will be assessed on affordability rather than the rental cover on the property.

Buy-to-let experts have warned that the sector would be stifled. Mr Cox said this was very much a “fingers crossed situation” since it was possible that the European Commission would allow Britain’s buy-to-let sector an exemption.